Amidst an ongoing economic struggle, the Czech Republic faces a concerning trend of diminishing real wages, despite an uptick in nominal average salaries observed at the close of last year. However, this apparent increase in wages is overshadowed by a sharper rise in consumer prices during the fourth quarter of 2023, eroding the real value of wages and marking the ninth consecutive quarter of decline in real terms. Analysts anticipate further insights into wage development when the Czech Statistical Office (CSO) releases data next Tuesday.

Contrary to the Ministry of Finance’s optimistic estimate of 8.2%, recent data on the Gross Domestic Product (GDP) structure suggests that wage growth in the fourth quarter is more aligned with the Czech National Bank’s (CNB) forecast of 6.2%. Chief economist of the Czech Banking Association, Jakub Seidler, highlights a slowdown in year-on-year wage growth to 6.5% in the fourth quarter of 2023, following a 7.4% rise in the preceding quarter.

Despite the overall decline, certain sectors witnessed notable wage surges towards the year’s end. Real estate activities reported a double-digit year-on-year growth rate, while employees in the information and communication sectors, banking and insurance, and industry experienced wage growth exceeding seven percent. Conversely, agricultural sector workers saw only marginal wage increases.

The overall average wage growth for the economy reached 6.6%, according to Vít Hradil, chief economist of Cyrrus. However, this growth failed to outpace inflation, resulting in a year-on-year decrease of 0.9% in real wages.

Looking ahead, analysts project a return to real wage growth in 2023, driven by lower inflation rates, persistent labor shortages, and efforts to offset the previous decline in households’ purchasing power. Despite the current challenges, prospects for nominal wage growth remain favorable, offering a glimmer of hope for a more resilient economic outlook in the coming year.

Article by Prague Forum